Industry Failing Under Weight of Russian Reform

Factory managers say they also suffer from outrageous banking practices of the country's many new commercial banks. Once able to obtain cheap, quick credit from state banks to tide them over until money from sales came in, factories now must pay as much as 186% in interest for loans from commercial banks. And the banks often take 30 to 60 days to transfer to the factories payments collected from factories' customers.

"It's a wild economy," said Vladimir Larin, union chief of the cash register factory known as SAM, the Russian acronym for Calculating-Analytical Machines. "We're in a transitional stage where there is no control."

The government is working frantically on all kinds of regulations for banking and trade, for bankruptcy filings and for conducting other business affairs. But Larin and his co-workers feel utterly abandoned. "The government isn't even interested that such a large factory has closed," he said. "We're left to the whims of fate."

Gennady Ivanov, craning his neck to read the notices at Ryazan's only unemployment office, felt similarly abandoned. Out of work for three months after being laid off by a Ryazan factory, the 34-year-old tractor driver has looked far and wide for a new job, without success.

"The factories are all closing," he said, rubbing his chin with fingers sporting the tattoos--one letter on each finger--common to provincial workers who ran wild in their youth. "Now I have to just leech off my wife. Even the kolkhozi (collective farms) don't need a tractor driver."

Ryazan is home to only about 3,000 jobless now, but "if the government doesn't take serious measures, there will be massive unemployment," Kanayev said. "Twenty-eight thousand families could end up without means of support."

But city officials do not appear to be worried. Dmitri Chekurin, deputy chairman of the city council, said that laid-off workers can always go back to farming in the empty countryside, "returning to their roots." Anyway, he said, the factories themselves are at fault for the town's burgeoning unemployment, having doomed themselves because of their resistance to change.

Their directors, who won their privileged posts under the former Communist-dominated system and are accustomed to treating their plants as their own fiefdoms, are naturally doing all they can to cling to the old order, Chekurin said. If the government cannot sweeten the reforms for them, so they can feel sure of coming out relatively rich, then "nothing will come of the reforms," he said. "And any director can provoke a strike whenever he wants."

Defense factory officials, who were among the most enthusiastic supporters of the old Communist regime, also retain deep ideological antipathy for the idea of getting tough with industry and the working class, the former darlings of Leninism.

"The working class has become the hostage of all this change," complained Alexei Chamkin, deputy director at the Lenin Komsomol factory. "And that's a violation of human rights. . . . They (government officials) want us to copy your model. Well, it may be all right for America. Not for us."

Despite such objections from within the factories, Chekurin said, the simple calculus of economics must ultimately triumph, and the layoffs must come.

Western experts have calculated that a modern factory like the SAM cash register plant should employ about 200 workers instead of the current 8,000. "Under no conditions can it be profitable," Chekurin said.

Factory officials agree that they have to change--but not like this.

"We're just having all the blood sucked out of us," Nurmukhametov said.